MPC Corporation’s
Proposed Acquisition of
Gateway’s “Professional” Business Unit
John Yeros, CEO
MPC Corporation
Forward-looking Statements & Confidentiality
Any statements in this presentation, other than statements of historical fact, are forward-looking statements. Forward-looking
statements are based on current management expectations and assumptions. However, there is no assurance that such
expectations will occur or that the assumptions will prove accurate. Our actual future performance could differ materially from
the forward-looking statements. Forward-looking statements in this presentation include statements with respect to the
possible acquisition of Gateway's "Professional" Business Unit. MPC and Gateway have not signed an acquisition agreement
with respect to this proposed transaction, and it is possible that an acquisition agreement will not be signed under that
currently expected timeline or at all. If an acquisition agreement is signed, it may contain terms and conditions that differ
materially from the terms described in this presentation. Any acquisition agreement would be subject to a number of
conditions to closing that may never be satisfied or waived, including that MPC obtain the exercise for cash of outstanding
warrants and the conversion of outstanding convertible debt. Statements in this presentation with respect to possible future
performance of a combined company are also forward-looking statements. The combined company could fail to achieve
projected revenue, margin and other financial performance measures. A combined company would face significant risks and
uncertainties, including the ability to retain customers and employees, retention of vendor support in funding the
combined operation, the ability to transition product lines, the ability to effectively combine management teams, and the ability
to obtain required intellectual property licenses on terms acceptable to the combined company or at all. The interests of
current shareholders would be diluted in connection with the proposed transaction. MPC faces significant liquidity challenges,
and the combined company would continue to face such challenges. Investors are encouraged to carefully review MPC's risk
factors set forth in its most recent Form 10-KSB and Form 10-Q filed with the Securities and Exchange Commission. Except
as required by law, we are not obligated to provide or release publicly any revisions to these forward-looking statements that
might reflect events or circumstances occurring after the date of this presentation or those that might reflect the occurrence of
unanticipated events. The information in this presentation is provided under terms of a non-disclosure agreement. By
receiving this presentation, you confirm and agree that the terms of such non-disclosure agreement apply to the
presentation.
Overview of Proposed Combination
Profile of New Company
Customer Segments
Products
Operations
Pro-forma P&L and Balance Sheet
Pro-forma Valuation & Deal Structure
Agenda
Overview
MPC today is a $300 million PC company focused on government, education,
and commercial customers
Gateway today is a $4 billion PC company with three business units
Retail: focused on home users
Consumer Direct: focused on home users and small businesses (<100 employees)
Professional: focused on government, education and commercial customers
Gateway is interested in divesting the Professional business unit, as it no
longer considers this segment core to its strategy
MPC is negotiating with Gateway to acquire this business unit and integrate it
into its existing infrastructure
Gateway Snapshot (NYSE: GTW)
Market cap: $665 million
Shares outstanding: 371 million shares
Average daily volume: 4.9 million shares
Analyst coverage: Argus Research Morgan Stanley
Bear Stearns Needham & Co.
Citigroup Standard & Poors
FTN Midwest Securities Value Line
Goldman Sachs WR Hambrecht
Motley Fool commentary: “Gateway managed to tack on 310 basis
(5/9/07) points to last year’s Pro gross margin…”
“Gateway should forget retail and poach the
best corporate accounts from its largest
rivals…”
Profile of Combined Company (“MPC Pro”)
Combining MPC and Gateway’s Professional business unit creates a powerful
PC company that is large enough to be relevant in the industry
With sales of over $1.1B and 1,000 employees, it would rank among the top
five PC companies in the US serving the professional markets of government,
education and commercial
Balanced segment mix of commercial, government and education
Balanced product mix, including a higher-margin server/storage business of
over $40 million
A formidable sales force of 430 sales reps, with 300 inside reps in two call
centers and 130 field reps spread across the country
Pro Forma P&L
Relevant in Industry Market Share
Dell
49%
HP
22%
Lenovo
9%
Other
9%
MPC Pro
Market share
6%
Apple
5%
US PC vendor market share among government, education & commercial customers
Total market size is $20 B
Competitive Data Source: IDC Market Research, 2006
MPC Pro Data Source: MPC, Gateway Internal Projections
MPC Pro Value Proposition
Lower total cost of ownership for overall PC investment
US-based high-quality tech support
Dedicated account management
Custom configuration and software image loads
Responsiveness and flexibility
Understanding of IT needs in commercial, government and education
segments
Higher attention to “Pro” segment customers compared to Dell & HP
MPC Pro Customers
Mid-Size Enterprise (Commercial)
(Businesses with 100 - 5,000 employees)
Federal Government
Top agency customers include VA, Army,
Air Force, Coast Guard
State/Local Government & Education (SLE)
Ed includes both K-12 and higher ed
schools
Government
33%
SMB
26%
Education
41%
MPC Pro Segment Mix Breakout
Federal
16%
Commercial
26%
K-12
23%
Higher Ed
18%
State/Local
17%
Diversification and balance of the combined entity is better
than either one as a stand-alone
MPC Pro Product Mix
Desktops
43%
Notebooks
27%
Services
10%
3rd party
16%
Server/Storage
4%
Combined entity has a well-balanced product portfolio with growth
vectors in Services, 3 rd Party and Servers/Storage
MPC Pro Products
MPC Pro will sell both Gateway-branded and MPC-branded hardware
into the Gateway Pro customer base
Customers will want to keep platforms stable for the near-term and
transition to MPC-branded products over one year
MPC has one-year license to use Gateway brand
Overlapping product lines will merge over one year
Mainstream desktops
Mainstream notebooks (MPC will add Gateway suppliers)
Mainstream servers
For unique Gateway products such as tablets, MPC will assume supplier
relationships
Gateway Product & Service Awards
Technology Business Research: Corporate IT Buying Behavior
June 2006: #1 in Customer Satisfaction for Notebooks
Dec 2006: #1 in Customer Satisfaction for Desktops
[H]ardOCP (Dec 2006): Gateway is Best Tier-1 Integrator
PC Magazine (Dec 2006): E-100M Ultraportable Notebook
4.5 out of 5 Stars, Editors’ Rating “Very Good”
Network World (Nov 2006): E-100M Ultraportable Notebook
4.5 out of 5 Stars, Editors’ Rating “Very Good”
FOSE Government Trade Show (March 2007): E-9722R Server
Best of FOSE 2007: Enterprise Hardware Category
Sales Transition
MPC Pro will launch a comprehensive communications program to
educate and retain Gateway Pro sales and marketing people
Professional customer segment is now the entire business
MPC Pro management understands these segments and will position
the company for profitability and growth
Gateway Pro management will play key roles in the new company
No major reorganizations planned immediately
No changes to sales compensation model planned immediately
Customer Transition
MPC Pro will launch a comprehensive communications program to
educate and retain Gateway Pro customers
Reassuring and retaining Gateway Pro salespeople will be instrumental
in this effort
Customers should be reassured with a year-long product transition
plan
In addition to communications from sales, we will reach out to
customers directly
Letter from the CEO explaining the strategy behind this combination
and the benefits that they will see, including HP printers, IP SANs, and
additional all-in-one desktop form factors
MPC executive management will meet face-to-face with largest
customers
Valuation and Merger Consequences
Proposed Transaction Structure
Assets acquired
Identifiable Pro inventory (WIP and warranty)
Pro BU intangibles, including contracts, customer lists, workforce
FF&E and technology for GTW personnel
Liabilities assumed
Warranty liability (est. $56M)
Securities to be issued
Short-term note for approximately $10M
Equity in MPC (<20%)
MPC secures up to $10M of new capital from existing investors through
cash exercise of warrants, and secures conversion of outstanding
convertible notes
LOI Terms
Assumption of Warranty Liabilities $56,000,000
Working Capital Investment 10,000,000
Common stock in MPZ 9,300,000
Estimated fair value of warrants in MPZ 1,200,000
Preliminary Transaction Value $76,500,000
Notes: Assumes stock issued at $1.10 per share. Warranty liability is a preliminary estimate. Working
capital investment dependent on net inventory levels at closing. Does not include additional funding raised
by MPC for combined entity. Includes warrants issued at 19.9% of outstanding options and warrants at close.
Purchase price
1.
MPC converts all outstanding convertible notes and debentures
2.
MPC exchanges all outstanding $1.10 warrants for cash
3.
Gateway provides MPC with excess inventory tied to promissory note
4.
Gateway raises additional capital in the amount of at least $80mm
5.
Obtaining applicable regulatory approvals, including HSR, if applicable
6.
Consent from key ODM’s, including Quanta, to transfer GCC interest
Closing Conditions
MPC Current Cap Table
Conversion Cash ImpactCash Impact
Total Price Near-term Long-term
Common Stock 13,075,200
Stock options
MPZ outstanding options 589,417$3.52 $2,074,748
Restricted Stock Units (granted, subject to vesting) 2,069,100
Warrants
Warrants Outstanding pre-IPO 356,642$3.50 $1,248,247
Warrants issued to Investment Bankers in Merger 300,000$3.00 $900,000
IPO Warrants Outstanding 3,600,000$5.50 $19,800,000
IPO UW Warrants 270,000$3.03 $817,200
GTG PC Investments LLC - $5.50 Warrants 1,330,524$5.50 $7,317,882
MIC Holding Company LLC - $5.50 Warrants 1,325,212$5.50 $7,288,666
WFF Warrants ($3.00 and $5.50) 97,510$3.58 $349,066
Toibb Investments Warrants issued for Bridge 1,027,500$1.10$1,130,250
Crestview Capital Warrants issued for Bridge 342,500$1.10 $376,750
Maxim Warrants per Engagement Letter 120,000$1.60 $192,000
Warrants Issued in Private Placement (Tranche 1) 4,924,500$1.10$5,416,950
Warrants Issued to Maxim for Pvt Placement (Tr 1) 546,000$1.10 $600,600
Warrants Issued to Crestview for Consulting Agreement 360,000$1.10 $396,000
Warrants Issued in Private Placement (Tranche 2) 2,468,125$1.10$2,714,938
Warrants Issued to Maxim for Pvt Placement (Tr 2) 499,867$1.10 $549,854
Convertible Debt (Assumes 100% Conversion
Unconverted Bridge Loans 85,714
Bathgate $550,000 Note at Closing 165,000
Private Placement Tranche 1 13,132,000
Private Placement Tranche 2 6,581,667
Total shares (fully diluted) 53,266,478 $10,034,888$41,138,263
MPC Pro Cap Table (Post Closing)
Cash-In
Total Long-term
Common Shares
Common Stock 13,075,200
C/S - $1.10 Warrants 9,122,625
C/S – Note Conversions 19,964,381
Gateway Shares 10,430,608
Total common shares 52,592,814
Stock options
MPZ options 589,417 $2,074,700
MPZ RSUs 2,069,100
MPC Warrants 8,445,755 $39,064,435
Gateway Warrants 2,201,724
Total Options and Warrants 13,305,996
Pro Forma P&L
Pro Forma Balance Sheet
Pro-Forma Cash Flow
MPC Pro Modeling – Major Assumptions
Transaction/transition costs appr. $1M; cap ex <$2.0M
Combined entity achieves revenue growth and preserves
blended material margins
Pro forma cost adjustments of Pro reflect adequately the
cost burden to be replaced by MPC
Service and Support
Supply Chain Management
Vendor lines will provide a substantial portion of initial
funding to MPC Pro
Proposed Timeline
June 4 Signed Letter of Intent; attorneys begin drafting definitive agreement;
final due diligence list presented; investor meetings begin
June 11 Contact initiated with ODMs, suppliers and benefits providers
June 15 Investor meetings completed
June 22 Due diligence substantially completed; organizational charts completed;
transition and communications plans completed
June 29 Definitive agreement and lease agreements completed
June 30 Begin to execute transition and communications plans
July 13 Sign definitive agreements and public announcement
Q&A
